Contents

Abbreviations and Acronyms............................................................................................... ii

Foreword................................................................................................................................iv
1. The Governance Year in Brief........................................................................................... 1
2. Governance Reforms in 2012........................................................................................... 2
2.1. The Leadership and Integrity Bill.............................................................................................................................. 2
2.2. The Political Parties Act and the Elections Act................................................................................................. 3
2.3. The Election Campaign Financing Bill 2012...................................................................................................... 3
2.4. The Freedom of Information Bill 2012................................................................................................................... 4
2.5. The House of Greed....................................................................................................................................................... 5
2.6. Security Sector Reforms................................................................................................................................................. 5
3. The Long Arm of the Law.................................................................................................. 7
3.1. Tourism Officials Charged............................................................................................................................................. 7
3.2. Vetting of Judges and Magistrates.......................................................................................................................... 8
3.3. First Conviction on Anglo Leasing........................................................................................................................ 11
3.4. Appointment of the Chair of the EACC............................................................................................................. 12
3.5. The Downfall of Nancy Baraza................................................................................................................................ 13
3.6 Establishing an International Crimes Division of the High Court..................................................... 14
4. Setbacks in the War against Corruption........................................................................ 16
4.1. The National Hospital Insurance Fund............................................................................................................... 16
4.2. Tender Wars over BVR Kits.......................................................................................................................................... 17
4.3. Kanu Era Scandals Resurface................................................................................................................................... 19
4.4. Underhand Deals to Print Money......................................................................................................................... 20
4.5. Corruption in the Kenya Railways Staff Retirement Benefits Scheme........................................... 21
4.6. No payment for Kenya Petroleum Refineries Shares................................................................................ 22
4.7. Mismanagement of the Constituency Development Fund................................................................. 22
4.8. Corruption at City Hall.................................................................................................................................................. 23
4.9. Lining pockets at the Ministry of Defence...................................................................................................... 23
4.10. Ethics and Anti-Corruption Commission Cases under Investigation............................................. 23
4.11. Murky goings-on in the Extractive Industry................................................................................................... 25
4.12. Bribes and Fraud in the Private Sector.............................................................................................................. 26
5. The Murky Practice of Money Laundering.................................................................... 27
6. The Year Ahead................................................................................................................ 29
6.1. Transition to Devolved Government........................................................................................................................... 29
6.2. The Exit of President Mwai Kibaki.................................................................................................................................. 29

Abbreviations and Acronyms

AfriCOG

Africa Center for Open Governance

AFC

Agricultural Finance Corporation

AG

Attorney General

BVR

Biometric Voter Registration

CDF

Constituency Development Fund

CIC

Commission for Implementation of the Constitution

CMA

Capital Markets Authority

CMC

Cooper Motor Corporation

DCJ

Deputy Chief Justice

DPP

Director of Public Prosecutions

EACC

Ethics and Anti-Corruption Commission

FATF

Financial Action Taskforce

FRC

Financial Reporting Centre

GoK

Government of Kenya

ICC

International Criminal Court

IEBC

Independent Electoral and Boundaries Commission

IFES

International Foundation for Electoral Systems

JSC

Judicial Service Commission

KAA

Kenya Airports Authority

KACC

Kenya Anti-Corruption Commission

KDF

Kenya Defence Forces

KNBS

Kenya National Bureau of Statistics

KPRL

Kenya Petroleum Refineries Limited

ii

KRA

Kenya Revenue Authority

KTB

Kenya Tourist Board

LSK

Law Society of Kenya

NCLR

National Council for Law Reporting

NHIF

National Hospital Insurance Fund

NSIS

National Security Intelligence Service

NOCK

National Oil Corporation of Kenya

NSSF

National Social Security Fund

OLN

Operation Linda Nchi

PAC

Parliamentary Accounts Committee

PPDA

Public Procurement and Disposal Act

PPOA

Public Procurement Oversight Authority

iii

Foreword
The Kenya Governance Report 2012 is the second in a new series by the Africa Centre for Open
Governance. Every year, AfriCOG will review the events of the past year as they relate to critical
issues and developments in governance reform and efforts against corruption, analyse their
implications and make recommendations for the future. We aim to do this in an accessible manner,
for wider consumption.
It is hoped that the Kenya Governance Reports will over time develop into a key resource on
matters of governance and anti-corruption for our partners in civil society, the public sector, the
international community and the general public. This report was finalised in early 2013 and covers
the period from January to December 2012.
AfriCOG would like to thank its Board of Directors, Stella Chege, John Githongo, Maina Kiai and
Funmi Olonisakin for their support to our work.

Gladwell Otieno
Executive Director

iv

1. The Governance Year in Brief

Like a frog climbing out of a well, progress in governance reforms during 2012 took two steps
forward and one step back. The judiciary made bold steps in the cause of fighting impunity:
judicial officers with records that did not meet constitutional standards on leadership and integrity
were shown the door, while the appointments of some officers were successfully blocked on
account of their dubious pasts. In addition, the year saw the first ever conviction on the Anglo
Leasing scandal.
The year also witnessed some major setbacks in the war against corruption. Parliamentarians failed
to enact laws that could end graft, and deliberately amended them to weaken the legislative
framework and give themselves more power. The excesses of the Kanu era returned to haunt the
country and there were attempts to swindle the public out of huge amounts of money in high
value procurement deals.

2. Governance Reforms in 2012

There are some things in which the 10th Parliament can take pride over its predecessors. One is
the record number of bills that it passed, particularly in its final year. While only 81 bills were passed
in the four years from 2008 to 2011, by 3 January 2013, more than 88 bills had been passed during
2012 alone.1
Unfortunately, the numbers are as far as the credit goes. In a rush to beat constitutional deadlines,
Parliament not only ignored the spirit of public participation enshrined in the constitution, but
also compromised the quality of the laws passed. On some occasions, self-interest trumped public
good as MPs passed laws that served their own ends.

2.1.

The Leadership and Integrity Bill

Perhaps the most disappointing failure of Parliament to reform governance relates to the actions
of both the cabinet and Parliament to water down the Leadership and Integrity Bill. While the initial
Bill proposed by the Commission on the Implementation of the Constitution (CIC) represented the
aspirations of Kenyans as expressed in the Constitution of Kenya 2010, the cabinet deleted several
key provisions, making it possible for persons of questionable integrity to hold public office.
In the opinion of the CIC, the leadership and integrity law that was eventually enacted is not
only ineffective in implementing Chapter 6 of the constitution, but also contains clauses that are
unconstitutional. The main grounds on which CIC faulted the Bill are:2
It did not reflect proposals and memoranda received from the public on what should be
contained in a leadership and integrity law.
It failed to establish transparent procedures and mechanisms for the effective administration
of chapter six of the constitution.
It failed to establish a vetting process for persons seeking election to public office.
It does not provide for public input and participation in the vetting process for persons seeking
election or appointment to state office.
It watered down key provisions of Article 77 dealing with gainful employment and Article 73
on responsibilities of leadership.
It failed to provide for a mechanism that would allow the Ethics and Anti-Corruption
Commission (EACC) to prosecute cases that breach Chapter 6 where the Director of Public
Prosecutions (DPP) refuses to prosecute without good cause.
The Leadership and Integrity Law is meant to give effect to Chapter 6 of the constitution, but the
current, watered-down version of the Law is unlikely to be effective in improving the quality of
future leaders. Indeed, as it now stands, there are no provisions for the vetting of political aspirants.
Moreover, there are insufficient barriers to the ascendancy of politicians who have broken the law.
Not only can those with pending criminal cases still legally run for office, they are not required to
make information related to those cases publicly accessible. Overall, the Leadership and Integrity
Law does little to advance transparency and upset the status quo.
1

Kenya National Assembly. Directorate of Legislative and Procedural Services.

Commission on the Implementation of the Constitution. 7 Aug 2012. Opinion of CIC on published leadership and
integrity bill 2012.

An opportunity still remains to strengthen the current Leadership and Integrity Law by way of
amendments. However, until this is done, Kenyans should be vigilant and monitor how matters of
ethics and integrity are dealt with by Parliament, the Judiciary and other institutions.

2.2.

The Political Parties Act and the Elections Act

In a similar quest for self preservation, parliamentarians made cynical amendments to the Political
Parties Act and the Elections Act to remove the time constraints that would have limited incidents
of party-hopping (moving from one party to another). They amended Section 34 of the Elections
Act, removing the requirement to be a member of a political party for at least three months before
being nominated for an elective position.
MPs also suspended parts of the Elections Act requiring them to meet certain integrity and
academic qualifications to be eligible for contesting elective office in the March 2013 polls. Under
the Miscellaneous Amendment Act of 2012, Section 22 (1) (b) of the Elections Act that requires any
candidate to hold a post-secondary school qualification, was suspended until the next general
election. The requirement to hold a degree certificate from universities recognized by Kenya now
only applies to the presidential and gubernatorial positions, together with their respective running
mates in the 2013 elections.
Limits on party hopping seek to increase the institutional strength and discipline of parties by
mandating that members espouse a certain degree of loyalty ideologically or otherwise - to
the party. A by-product of institutionalised political parties is institutionalised politicians, who
are active in the political arena for substantive reasons that go beyond wealth accumulation and
personal ambition. Such limits are also meant to ease the logistical challenges of the nomination
process, which can be complicated by last-minute changes.
While it is true that requiring political aspirants to have achieved a relatively high level of education
potentially locks out some otherwise well-qualified candidates, such educational standards go a
long way in ensuring that those entrusted with passing legislation understand the process and
impact of their work. Now, as Parliament enjoys new powers to introduce laws, it is likely that the
standard for debates and discussions around new laws will be lower. This will result in defeating
one of the main purposes of the reform, which was to improve the standard of laws.
What is perhaps most important, however, is the fact that the amendments described above were
not the result of open and inclusive discussions. While the original reforms were authorized by
the public at large, the changes to those reforms were not agreed upon by the Kenyan people. As
such, these amendments may be unconstitutional, not only because they do not comply with the
constitution but also because they are the result of MPs acting in breach of their mandate.

2.3.

The Election Campaign Financing Bill 2012

The 10th Parliament will also be remembered for squandering opportunities in terms of critical
bills that it did not pass. The Election Campaign Financing Bill 2012 is a pertinent example.
The aim of the Bill was to provide for the regulation, management, expenditure and accountability
of election campaign funds, which, in view of the close correlation between grand corruption and
campaign financing, would have been a game changer in the 2013, and future, elections.

The Bill gave sweeping powers to the Independent Electoral and Boundaries Commission (IEBC)
to regulate campaign financing. Had it been passed, it would have empowered IEBC to:
Supervise candidates and political parties in relation to campaign expenses
Set spending limits and enforce compliance with such limits
Verify sources of contributions to a candidate, a political party or a referendum committee
Monitor and regulate campaign expenses
Receive expenditure reports from candidates, political parties and referendum committees
Require a candidate or a political party to disclose the amount and source of contributions
received for campaign, nomination or election.3
The Bill also sought to bar collection of campaign funds from organisations, foreigners, foreign
States and anonymous or illegal sources, in addition to expressly prohibiting the use of state
resources by those seeking office. Sadly, by the time Parliament wound up its business, the Bill
was still awaiting debate.
The Campaign Financing Bill sought to address the long-standing problems related to the influence
of wealth on political campaigns and political office, especially as expensive conventional and
social media become increasingly critical to successful campaigns. The Bill would have ensured
that campaign funds only come from legitimate sources and that the flow of money is open to
public scrutiny. Contribution and expenditure caps would also have started to equalize the playing
field, making it more difficult for well-endowed sources to buy influence and more difficult for
well-connected politicians to simply drown out qualified but less wealthy competitors.
Without campaign finance regulations in place, the status quo will remain and aspirants will be
free to fund their campaigns through less than transparent sources, who will similarly be able to
silently make their voices heard after elections are over.
In the future, advocacy efforts will have to be directed towards the enactment of the Bill.

2.4.

The Freedom of Information Bill 2012

The other major disappointment was the very slow progress made towards the enactment of
a Freedom of Information Bill. The Bill if enacted, would have given effect to Article 35 of the
constitution, which guarantees every citizen the right to access information held by the State or
by any another person, that is required for the exercise or protection of any right or fundamental
freedom. Such access to information legislation is widely viewed as a very potent weapon in the
fight against corruption and impunity.
As the year came to a close, the Freedom of Information Bill, 2012 was still undergoing internal
review and stakeholder consultations by the CIC.4
The Freedom of Information Bill is important, because it activates the constitutional provisions
guaranteeing the public access to information gathered by the government and thereby promotes
transparency. Without such a law, the Kenyan public is restricted in its ability to investigate issues
of interest and maintain a public check on government activities. In order to continue to promote
transparency and accountability, civil society must advocate for urgent action to pass the Bill.

The Government Printer, Nairobi. The Election Campaign Financing Bill 2012.

CIC. 19 November 2012.CIC Holds Round Table Meeting In Finalization Of The Freedom Of Information And Data
Protection Bills. http://www.cickenya.org/index.php/newsroom/item/251-cic-holds-round-table-meeting-infinalization-of-the-freedom-of-information-and-data-protection-bills#.UWF5eVK4jIU

2.5.

The House of Greed

MPs will also be remembered for the laws they tried to enact to line their own pockets. In October
2012 they attempted to push through a Ksh2.1 billion send-off package, which would have seen
each of them take home Ksh9.6 million at the end of their term. They blackmailed the Executive
by threatening to scuttle the Finance Bill if they did not get their way. In complete disregard of
the constitution and the mandate of the Salaries and Remuneration Commission they sought to
be judges of their own cause, thereby severely compromising the principles of transparency and
accountability. The country was only saved from these unconstitutional actions by the Presidents
refusal to assent to the Finance Bill.
The failure to enact the Election Campaign Financing Bill 2012, the changes and amendments
made to the Leadership and Integrity Bill, the Political Parties Act and the Elections Act constituted
a major setback to governance reform. They effectively maintained the status quo, or what John
Githongo (a vocal advocate against corruption in Kenya over the years) describes as:
(The) Big Man model of leadershipthe picture of a leader in a big car or making a grand arrival in a
helicopter that flattens maize fields when it lands; who dishes out cash as if he prints it at home; who
speaks much and listens little; for whom theft is capitalism in disguise, for whom wananchi are voters,
not citizens.5

2.6.

Security Sector Reforms

The much awaited reforms in the police service were painstakingly slow in coming. By the
middle of the year only 18 recommendations made by the National Task Force on Police Reforms,
from a total of 207, had been implemented significantly.6 The implementation of most of the
recommendations had stalled due to political, policy and administrative issues.
There was much fuss from stakeholders following the enactment of the National Police Service Act,
2011 and the National Police Service Commission Act, 2011, when the enactments were followed
by a delay in the appointment of commission members, the Inspector General, two deputies and
the director of criminal investigations. These appointments were deemed critical as the country
prepared for elections in 2013.
In the second half of the year however, considerable progress was made. In June 2012 Chief
Justice Dr Willy Mutunga swore in the Chair and members of the Independent Police Oversight
Authority Board. The establishment of the board was a significant first step in addressing impunity
in the police force, as its mandate is to investigate complaints by civilians relating to disciplinary or
criminal offences committed by police officers.
In early October, members of the National Police Service Commission were sworn in and they
proceeded with the task of conducting public interviews for the countrys top police jobs. In
late December 2012, David Mwole Kimaiyo was sworn in as the countrys first Inspector General,
having been nominated by the President and Prime Minister and further vetted and approved
by Parliament.

John Githongo (Undated). Gender Democracy against the Backdrop of the Leadership and Integrity Bill, 2012.

Usalama Forum. June 2012. Preparedness of the Police to Combat Insecurity and Crime. Police Reform Monitoring Project.

While the appointment of the Inspector General and his deputies is

an important step, the success of such reforms is intimately linked to
reforms in other political institutions, including the Judiciary and the
National Security Intelligence Service. A trustworthy and efficient police
force, for example, is critical for citizens pursuing or involved in criminal
cases in court. It remains to be seen how thorough the vetting process
for the rest of the security forces will be, but a sound process could
bring more accountability to the security sector. It is imperative that civil
society continue its advocacy around security sector reform and help
the public engage in such discussions.
Inspector General David Kimaiyo

http://www.the-star.co.ke/sites/default/files/styles/node_article/public/images/articles/2013/02/16/107814/5.png

3. The Long Arm of the Law

The high bar on integrity set by Kenyas 2010 constitution continued to haunt persons of
questionable integrity as the careers of some long-serving public and judicial officers came
crashing down.

3.1.

Tourism Officials Charged

In May 2009, following recommendations by the then Kenya Anti-Corruption Commission, former
Ministry of Tourism Permanent Secretary (PS), Rebecca Nabutola and ex-Kenya Tourist Board (KTB)
Managing Director, Achieng Ongonga were charged with conspiracy to defraud the Ministry
of Tourism of Ksh8.9 million. They were charged together with an alleged accomplice - a tour
operator and former KTB board member, Duncan Muriuki Kuguru.
The case involved investigations into the illegal payments of money to a tour company that
coordinated a visit to the Maasai Mara by President Mwai Kibaki and other top government
officials. It was alleged that procurement procedures were flouted in awarding the tender to the
tour firm. According to the prosecution, Nabutola thought up the idea, Achieng sanctioned it
and the businessman was paid Ksh8.925 million for the trip.7 Nabutola was later charged with the
offence of abuse of office contrary to Section 46 of the Anti-Corruption and Economic Crimes Act
2003 and willful failure to comply with the law relating to procurement, contrary to Section 45(2)
(b) of the Anti-Corruption and Economic Crimes Act 2003. The former PS was further accused of
abuse of office by appointing Kugurus firm, Maniago Safaris, to coordinate transport to the game
reserve and instructing the Catering and Tourism Development Levy trustees to foot the bill.

Businessman Duncan Muriuki, former Kenya Tourism Board boss

Ongonga Achieng and ex-Tourism PS Rebecca Nabutola in a Nairobi
court, 2012. Photo by PAUL WAWERU / NATION MEDIA GROUP
http://www.nation.co.ke/image/view/-/1634002/medRes/432264/-/maxw/600/-/ssevbs/-/Officials+Dock+px.jpg

The Star. 11 September 2012. Nabutola, ex-KTB boss jailed for corruption by Sam Kiplagat. http://www.the-star.co.ke/
news/article-2700/nabutola-ex-ktb-boss-jailed-corruption

Ongonga faced a similar abuse of office charge for acting contrary to Section 46 of the AntiCorruption and Economic Crimes Act 2003, in addition to fraudulently making a payment from
public revenues for services not rendered, contrary to Section 45(2)(a)iii of the same Act.
In September 2012, the trio was found guilty of defrauding the Ministry of Tourism of Ksh8.9
million. Nabutola was jailed for four years with a fine of Ksh1 million, or in default, to serve a further
two years. Ongonga was sentenced to three years in prison, while Kuguru was sent to prison for
seven years without the option of a fine. He was further required to pay Ksh17.8 million in fines
or serve three years in default and to refund Ksh1.3 million to the Republic of Kenya, or serve one
more year in prison.8
Kenya has a strong anti-corruption framework with its domestic laws. The problem is and has
always been implementation. While the case of the Tourism Ministry is a successful story of the
prosecution and punishment of corrupt state officials, Kenya still has a long way to go in the
fight against corruption. In order for effective prosecution to continue, the courts must have the
capacity and resources to adjudicate such cases. Judicial reforms such as those mentioned above
are a harbinger of hope in this regard. Transparency in court processes is also important. The
National Council for Law Reporting (NCLR) is one effective mechanism, for it publishes judgments
and makes them publicly accessible for scrutiny and analysis. One area that still requires attention
is the Judiciarys case management system, which is severely lagging behind. A better organized
system could go a long way in helping to address problems such as the alleged loss/altering/
hiding of records; bribery; and the loss or destruction of evidence.

3.2.

Vetting of Judges and Magistrates

The constitution that was promulgated in 2010 requires judges and magistrates to be vetted to
establish their suitability to continue serving in the Judiciary.

The High Court buildings

http://upload.wikimedia.org/wikipedia/commons/4/43/Kenya_High_Court.JPG

8 Ibid.

Consequently, Parliament enacted the Vetting of Judges and Magistrates Act to provide the legal
framework under which the vetting process would be conducted. The Act also established the
Judges and Magistrates Vetting Board, which commenced work in 2011 and continued in 2012
with noticeable effect.
The vetting process was meant to address corruption, lack of independence and incompetence
within the judiciary. While the process could have been more inclusive, it did result in creating
a group of judges who, it is hoped, can be trusted to effectively handle cases before them in
a fair and timely manner. Overall, public confidence in the Judiciary increased after the vetting
procedures.
In its first determination during the year, the Board found four Court of Appeal judges unfit to
continue to hold office. The following is a summary of their findings.9
Honourable Justice Riaga Omolo
The Board found Justice Riaga Omolo to be lacking in independence and impartiality10 in a series
of decisions he had given in some highly publicised political matters. It found the judge to have
bent the law in favour of the incumbent president at a time of stark political repression. Further,
the Board found the judge to have played an active role in frustrating rather than enhancing
judicial scrutiny of alleged electoral irregularities, and that he had not held back from using his
judicial authority to manipulate the law in order to achieve a result that favoured impunity, limited
democratic expression and curtailed freedom.11
Honourable Justice Samuel Bosire
Justice Bosire was indicted for decisions he made when he chaired the Judicial Commission
of Inquiry into the Goldenberg affair. He ignored an order by the High Court that required the
Commission to summon as witnesses ten prominent persons, including the former President
Daniel arap Moi, the late George Saitoti, Musalia Mudavadi and Nicholas Biwott, stating that
the only power he had had was to give notice to the affected persons, and not to compel their
attendance. 12 In addition, as Chair of the Commission, Bosire chose not to comply with an explicit
and precise High Court order made against him as second respondent in an ex parte matter. He
did not seek to challenge the order on appeal. He simply treated it as if it was not binding on him
and ignored it. 13
Honourable Justice Emmanuel Okelo OKubasu
Judge OKubasu was dismissed over allegations of lack of integrity and fairness14 in decisions on
cases that he was hosted in a London hotel by a man whose brother had a case before him, and
that he presided over the case filed by a businessman who was close to him. The Board also found
the judge to have displayed a disconcerting lack of candour15 when he denied knowing the
businessman, given that he (the businessman) is a very well known public figure.
9

Judges and Magistrates Vetting Board. Determinations Concerning the Judges of the Court of Appeal. 25 April 2012.

10 Judges and Magistrates Vetting Board. Determinations Concerning the Judges of the Court of Appeal 25 April 2012 ,
http://www.jmvb.or.ke/images/documents/determinations.pdf, page 14.
11 Ibid, page 17.
12 Ibid, page 20.
13 Ibid.
14 Ibid, page 27.
15 Judges and Magistrates Vetting Board. Determinations Concerning the Judges of the Court of Appeal, http://www.jmvb.
or.ke/images/documents/determinations.pdf, 25 April 2012, page 25.

The London hotel issue made for some interesting reading. A witness ran a butchery patronised
by the judge. The witness sought advice from the judge after falling out with his landlord and
facing eviction. On the judges advice, the witness engaged a lawyer. The matter later came before
the judge and he granted a stay of eviction. Later, the witness learned that the judge was visiting
London and invited him to stay as a guest at a London hotel owned by the witnesss brother.
The judge apparently took up the offer. What might appear to be a minor indiscretion may have
tipped the balance against the judge.
Honourable Justice Joseph Nyamu
Justice Nyamu earned his marching orders for a number of startling decisions he made in cases
relating to the Goldenberg and Anglo Leasing scandals. According to the Board, he made a series
of rulings that frustrated attempts by prosecuting authorities to hold prominent businessmen and
political figures to account. All the rulings appeared to bend the law to protect impunity.16
He was part of the bench of three whose ruling permanently ended the then impending trial of
the late internal security minister, George Saitoti, over the Goldenberg scandal. The bench issued
orders striking out all portions of the Commission report touching on Saitoti, arguing that he
would not get a fair trial owing to the long delay in determining the case. The board observed
that by faulting the findings of a commission that had ceased to exist, the bench issued orders not
against the commissioners, but against a document.
Justice Nyamus decision on the 2008 Kotut case also effectively immunised the then Governor of
the Central Bank of Kenya, Eric Kotut, against prosecution for allegedly permitting the fraudulent
movement of Ksh3.5 billion out of the country.
To compound matters, on various Anglo Leasing cases that came before him, the judge:
Issued orders that stopped investigations of, and returned passports to persons whom the
KACC (the former anti-corruption authority, now replaced by the EACC) sought to have
investigated for alleged economic crime. In addition, the judge ordered that no information
be published concerning their being suspected of economic crimes and that they should not
be arrested or charged in the 2006 Nedermar case.
Struck down measures aimed at preventing the flight of persons suspected of corruption and
serious economic crimes in Khamani (2007)
Gave an initial stay of prosecution in the First Mercantile Security case, another Anglo Leasing
matter.
Justice Jeanne Wanjiku Gacheche
In August 2012, the Board found High Court judge, Justice Gacheche not fit to continue holding
office owing to her rulings in three insurance matters that profoundly dented public confidence
in the Judiciary. The Board expressed concern over her failure to comprehend and respond to
the needs and experiences of ordinary people; it found that she used her judicial powers in an
inappropriate manner that had an extensive negative impact on thousands of people.17

16 Ibid, pages 34-35.

17 Judges and Magistrates Vetting Board. Determinations Concerning the Judges of the Court of Appeal. 3 August 2012.

10

In December 2012, a further five judges of the High Court were found not fit to continue serving
as High Court judges. They were judges Leonard Njagi, Nicholas Ombija, Joseph Sergon, Mary
Angawa, and Murigi Mugo.18
Justice Leonard Njagi - his tenure was terminated following claims by the EACC that he illegally
caused the transfer of LR. No 209/6238 IR No. 74856 belonging to Kenya School of Law to Rockville
Limited, a company in which he was a director19 while he was Principal of the Kenya School
of Law.
Justice Nicholas Ombija in addition to allegations of sexual harassment of an advocate, the
judge also faced accusations of failure to disqualify himself in a case involving a client he had
acted for while in private practice.20
Justice Joseph Sergon - was accused severally of receiving a bribe and taking money from
clients and conning them when he was in private practice as a litigant.21
The following judges were axed on issues not directly touching on integrity:
Justice Mary Angawa - found unfit due to her rigid conduct towards lawyers and litigants;
being disrespectful to parties appearing before the courts.
Justice Murugi Mugo also paid for being disrespectful to parties in court and lacking remorse
or capacity for introspection.22
Judges Mohamed Ibrahim and Roselyn Naliaka Nambuye23 were found unfit to continue
holding office largely on account of unacceptable delays in delivering judgments. Justice Joyce
Nuku Khaminwa was dismissed on account of delayed judgments and rulings occasioned by
her illness.

3.3.

First Conviction on Anglo Leasing

In September 2012, former Ministry of Home Affairs Permanent Secretary, Sylvester Mwaliko was
found guilty of abuse of office and fined Ksh3 million or three years imprisonment in default.

18 Business Daily. 21 December 2012. Vetting board rules on fate of judges.

19 Judges And Magistrates Vetting Board Fifth Announcement, Determinations On Suitability, 21 December 2012,
http://www.jmvb.or.ke/images/documents/Fifth_Determination.pdf, page 26
20 Ibid, page 31.
21 Ibid, pages 42 and 43.
22 Ibid, pages 16 and 24.
23 Judge Mohamed Ibrahim applied for a review of the decision and was re-instated with caveats including that his
pending judgments be delivered within a specific time and that rules are set regarding timely delivery of judgments
- Judges And Magistrates Vetting Board Sixth Announcement 15 January 2013, http://www.Jmvb.Or.Ke/Images/
Documents/Sixth_Determination.pdf, pages 9 and 12.

11

This was significant, being the first conviction relating to the Anglo Leasing corruption scandal
in which billions of shillings of public funds were paid to ghost companies. In her ruling, Nairobi
Chief Magistrate Lucy Nyambura found the prosecution to have proved beyond reasonable doubt
that Mwaliko signed the contract for the tender of new generation passports awarded to Anglo
Leasing without the knowledge of the immigration department, or verification of the status of the
company before agreeing to enter into any contract.24
While Mwalikos conviction was an important step in the fight against corruption, it pales in
comparison to the apparent impunity enjoyed by much more senior officials who were involved
in the scandal. The failure to pursue cases against such officials sets a dangerous precedent and
sends the message that power will protect criminals from being brought to justice.

3.4.

Appointment of the Chair of the EACC

In May 2012, President Mwai Kibaki, in consultation with Prime Minister Raila Odinga, appointed
Mumo Matemu as Chair of the Ethics and Anti-Corruption Commission (EACC). Earlier, the Clerk of
the National Assembly, Patrick Gichohi had signed the certificate confirming that Mumo Matemu,
Professor Jane Onsongo and Irene Keino had been approved by Parliament to lead the EACC,
the former as Chair and the latter two as members of the commission, and sent the names to
the President.
Four months later, Matemus appointment was nullified by the High Court. The nullification
followed a challenge of the appointment by a civil society organisation, Trusted Society of Human
Rights Alliance. Kenyans for Peace with Truth and Justice was enjoined in this suit as Amicus Curiae
(a friend of the court) and delivered an amicus brief on the integrity provisions in the constitution
regarding the Matemu case. Some MPs had also opposed Matemus appointment following
allegations that centred on his tenure at the Agricultural Finance Corporation (AFC) where he
served as legal officer, acting company secretary and deputy chief legal officer. It was alleged that
he was involved in deals that resulted in AFC losing millions of shillings worth of taxpayers money.
MP, Gitobu Imanyara for example, was quoted as having told his colleagues in the House that
Matemu was at the heart of a clique within AFC that colluded with dubious businessmen.
Businessmen of Asian descent would apply for loans of between Ksh18 million and Ksh24 million
from AFC, and then, all these loans would be written off these loans amounted to over Ksh5 billion,
Imanyara claimed.25
Mr Matemu was also accused of deliberately failing to collect Ksh2.4 billion in tax arrears from
a Nairobi based company, Kingsway Motors, during his tenure at the Kenya Revenue Authority
(AfriCOG 2011 report, Smouldering Evidence mentions the companys alleged role in money
laundering).
In September 2012 a three-judge bench of Justices Joel Ngugi, Mumbi Ngugi and George Odunga
ruled that Parliament and the Executive had overlooked issues raised about Matemus integrity
and thus nullified his appointment as the Chair of the EACC. They affirmed the determination
of the High Court to protect and uphold the constitution, which calls for high integrity from

24 Reuters. 5 Sep 2012. Kenya makes first conviction in Anglo Leasing graft scam.
25 The Standard. 21 September 2012. Why court nullified Matemus appointment by Isaiah Lucheli. At http://www.
standardmedia.co.ke/?articleID=2000066625

12

public officers. The ruling sent a strong message to those seeking public office and asserted the
role of the courts in reviewing appointments made by the Executive and Parliament. It was a
welcome breath of fresh air in view of the disappointment that followed the watering down of the
Leadership and Integrity Act 2012.

3.5.

The Downfall of Nancy Baraza

Then there was Nancy Baraza. The former Deputy Chief Justice (DCJ) left office in disgrace after
a tribunal investigating her recommended her removal for gross misconduct. The tribunal was
set up following accusations that Nancy Baraza had assaulted and brandished a gun at Rebecca
Kerubo Morara, a guard at an upmarket shopping mall. Various media accounts of the incident
described how Morara, in performance of her duties, insisted on frisking the DCJ as she entered
the shopping mall. Baraza resisted, pinched Moraras nose and told her to know people before
walking past her to a pharmacy in the mall. Morara further claimed that on her way back, the DCJ
warned that she could order her bodyguard to shoot her, proceeded to her car and came back
brandishing a pistol. Morara claimed she had to go on her knees to plead for her life.
Having displayed such arrogance, Barazas removal was something of a Kodak moment for
those fighting impunity, in that a little known security guard brought down the DCJ and Deputy
president of the Supreme Court of Kenya.

Nancy Baraza

http://1.bp.blogspot.com/-ODMNvwctyCI/UIB3rtwu4OI/AAAAAAAAHlw/MHqETr9ePq0/s1600/baraza.jpg

13

3.6

Establishing an International Crimes Division of the High Court

In May 2012, the Judicial Service Commission mandated research into the viability of the development
of an International Crimes Division of the High Court. The sub-committee of the Judicial Service
Commission developed a report recommending the establishment of such a division.26
The Chief Justice announced the establishment of the special division of the High Court to try cases
stemming from the 2007-08 post election violence, as well as other crimes under international law,
saying that the process of setting it up had already started and was effectively advancing. Once set
up, the special division would apply Kenyas Penal Code and the International Crimes Act, 2008.27
According to Attorney General Githu Muigai, it will take two years to get the court up and running.28

Attorney General Githu Muigai

http://www.the-star.co.ke/sites/default/files/styles/node_article/public/images/articles/2012/10/17/91359/aggithumuigai.png

26 The Star. 26 November 2012. JSC to set up new division to deal with poll violence by Nzau Musau.
27 Kenyan Chief Justice Announces Special Court, 10th December 2012 at http://iwpr.net/report-news/kenyan-chiefjustice-announces-special-court.
28 Kenyas Special Court Faces Uphill Task, 10 January 2013 at http://iwpr.net/report-news/kenyas-special-court-facesuphill-task

14

Despite the ongoing political rhetoric about justice for the victims of the post-election violence
(PEV), little has been done in the local context. It was recently announced that a special division
of the High Court will be established to address transnational crimes, but that division is still in its
inception. Given the alleged involvement of sitting senior State Officials in the perpetration of the
PEV, true independence of the special division will be critical to its success. In the same vein, the
State must demonstrate a commitment to witness protection so that those involved feel free to
speak about their experiences. Of course, lawyers, court staff and police officers involved in the
proceedings of this division will require specialized training, and the government will have to
allocate resources for this purpose.
It is also worth noting that the establishment of this special division will mark an important
occasion in Kenya. If successful, Kenya will finally be able to domestically address transnational
crimes such as terrorism, money laundering and wildlife poaching, all of which have plagued the
country for a long time.

15

4. Setbacks in the
War against Corruption
For a year preceding an election, when one might expect scandals arising from campaign
financing, surfacing incidents of the loss of public funds in 2012 were surprisingly few. However,
the year had its fair share of drama, as the following examples illustrate.

4.1.

The National Hospital Insurance Fund

The National Hospital Insurance Fund (NHIF), mandated to facilitate affordable, high-quality
healthcare for all Kenyans, is the main provider of health coverage in the country. Given the
centrality of the NHIF to the health sector, it is important that Kenyans are aware of how the
system functions.
Early in the year the National Hospital Insurance Fund (NHIF) rolled out a medical scheme for
civil servants worth an estimated Ksh4.2 billion. Under a system called capitation, selected health
facilities such as clinics, were to be paid in advance to provide health services to civil servants on
the basis of the clients they have recruited.
Allegations of corruption and bribery plagued the scheme from the start, as it turned out that
payments may have been made to ghost clinics with assigned, rather than actual recruited
patients. During the first quarter of the year, the NHIF was reported to have paid Ksh634.7 million
to public and private hospitals that had been identified to offer services. Of that amount, Ksh121
million was paid out to public health centres, Ksh69 million to mission hospitals, and the remaining
Ksh447 million to private hospitals. Two facilities - Clinix and Meridian Medical Centres allegedly
received more than 45 per cent of the amount paid to private hospitals, at Ksh116 million and
Ksh202 million respectively.29
It was alleged that at the time this money was paid out, more than half of all clinics under these
two institutions did not exist. It was also revealed that the biggest referral hospital - Kenyatta
National Hospital - with 26 departments handling thousands of patients daily, received only Ksh1
million, while Meridian Medical Centre in Kisumu, which, on a busy day handles an average of 20
patients, received nearly Ksh5 million.
Eyebrows were raised over the ownership of Clinix Healthcare Ltd, the firm that received the largest
share of the money, following revelations that it is 99 per cent owned by Pharma Investment
Holdings, a foreign company registered in the British Virgin Islands, an off-shore jurisdiction
sometimes associated with money laundering. Suspicions were heightened when a man, who
allegedly did not give his real name, represented the firm before a parliamentary committee, as
the CEO: the Clinix Healthcare CEO, Zac Madana, appeared before the Parliamentary Departmental
Committee on Health, wearing a large white turban and a pair of spectacles, which media reports
suggested were a disguise, after identifying him as a disgraced former spy.30
29 Daily Nation. 25 November, 2012. Lobbies want graft reports released by Peter Ngetich.
30 The Sunday Standard. 6 May 2012. How ex-spy fooled MPs over NHIF cash scam by Ben Agina and Alex Ndegwa.

16

The Committee accused Meridian Medical Centre of receiving millions of shillings when it did not
have hospitals in some parts of the country it had listed. It found that Meridian was paid Ksh116
million between January and March 2012, for 19 outlets, Ksh30 million of which may have been
for ghost facilities.31
When the issues came to light, several senior government officials got involved, issuing
contradictory orders that spoke volumes about how disjointed the government was. The following
events are examples:

Sackings and Counter Sackings at the NHIF

Thursday 3 May 2012 - Prof Richard Muga (Chair, NHIF Board) sacked the CEO Mr Richard
Kerich and suspended four top managers.
Thursday 3 May 2012 - Prof Anyang Nyongo (Minister for medical services) reinstated the CEO
minutes later, revoked the orders and instead suspended Prof Muga.
Saturday 5 May 2012 - Francis Kimemia (acting head of Public Service) sent home the entire
NHIF board as well as the Chief Executive, to pave the way for investigations.
Sunday 6 May 2012 - Minister Anyang Nyongo reinstated the NHIF board and its Chief
Executive, and stated that Mr Kimemia had no powers to micro-manage his ministry.
Monday 7 May 2012 - Prime Minister Raila Odinga announced the suspension of the Board
along with the CEO, ordered a forensic audit and appointed a caretaker committee. He also
appointed a deputy secretary in the Ministry of Medical Services, Mr A. A. Adan, to act as the
CEO during the period of the investigations.

The caretaker committee appears not to have performed any better. By the end of the year the
Efficiency Monitoring Unit, a government audit agency under the Prime Ministers office, was
reported to have recommended that action be taken against A. A. Adan for illegally accrediting
77 health facilities. The facilities in question were not accredited, licensed nor registered by the
Medical Practitioners and Dentist Board; Adans actions were therefore contrary to section 30 (1)
of the NHIF Act.
The NHIF scandal revealed just how little Kenyans healthcare was prioritized by those purporting
to provide it. A partial picture of the story was provided by the Parliamentary Committee on Health.
Such parliamentary action committees are useful, and they can provide important oversight
capabilities. It is worth considering how such committees can be strengthened and supported
in the future.

4.2.

Tender Wars over BVR Kits

At the IEBC there was controversy over the tender to supply 9,750 biometric voter registration
(BVR) kits for use in computerising the electoral process. The tender worth Ksh3.9 billion
attracted cut throat competition among local and international bidders, with allegations of
corruption and influence-peddling flying left, right and centre.
Three cabinet ministers, three foreign diplomats, and three politically connected powerbrokers
were reportedly among the many local and foreign players jostling for the lucrative contract.
The three top Western diplomats in Kenya allegedly visited the IEBCs offices separately to warn
that their governments would withdraw from a pool offering funding to IEBC if the tender was
not awarded to applicants from their countries.32
31 The Standard. 3 May 2012. MPs unearth NHIF pay scandal by Ally Jamah.
32 The Standard. 28 April 2012. Tender wars risk elections by Isaac Ongiri.

17

BVR Kit

http://elections.nation.co.ke/image/view/-/1711550/highRes/472127/-/maxw/600/-/155lq4c/-/DN+KAJIADO+VOTING+0403Y+px.jpg

Intrigue surrounded the companies that appeared in pole position to win the tender. These
were:
African Symphony, a local company which quoted Ksh3.85 billion
4G Identity Solutions from India, which quoted Ksh3.72 billion
Face Technologies from South Africa, which quoted Ksh4.78 billion
On Track from Israel, which quoted Ksh8.31 billion.
Questions were raised about African Symphony, which had been shortlisted despite the fact that
its ownership is shared with Computer Applications Ltd, a company blacklisted by Parliament
in the mid 1990s, from doing any business with the Kenyan government. In addition, it was
rated poorly for lack of experience, capacity and competence in carrying out biometric voter
registration.
Initial reports indicated that 4G Identity Solutions had been recommended for the award by
the IEBCs evaluation committee, being the lowest evaluated bidder. However, reports emerged
that 4G had been blacklisted in India. The Ministry of Foreign Affairs also advised the IEBC not
to engage in any business with the Indian firm. The Kenyan head of the directorate of Asia and
Australasia reportedly advised the IEBC on behalf of the foreign affairs Permanent Secretary
thus:
We write to inform you that Kenya Mission in New Delhi has conducted preliminary due diligence.
The Mission has requested us to convey their strong advice that their findings indicate the above
mentioned entity should not be allowed to enter into any business transaction with any government
institution in Kenya. 33
Despite the allegations, the tender committee rejected the recommendation of the evaluation
committee and a due diligence visit was organized to visit 4G Identitys headquarters in India.

33 The Star. 18 June 2012. IEBC to award Sh3.4 billion voters roll contract by Walter Menya and Mosoku Geoffrey.

18

The team comprised eight members, five of whom were from the IEBC. Curiously, two of the
team members were reportedly from UNDP, while one was from the International Foundation
for Electoral Systems (IFES).34 The team appeared to have given the company a clean bill of
health. It later turned out that the process could have been infiltrated by partisan interests, and
even extortionists from the Ministry of Foreign Affairs: there were unverified claims that officials
from the Ministry falsely reported that 4G had been blacklisted in India after its management
declined to pay a Ksh30 million bribe for a clean report.35
A re-evaluation team was then constituted (which again, curiously, included experts from
development partners) and a new report prepared, which appears to have maintained the
position that the award should be given to 4G. Against this recommendation of the evaluation
team, the tender committee recommended awarding the tender to Face Technologies, which
had been ranked third. This was highly irregular and the CEO of the IEBC, not satisfied with the
decision, wrote to the Public Procurement Oversight Authority for direction, on the grounds
that Face Technologies had been ranked third and had quoted a price well above the IEBC
budget. According to section 26 (3) of the Procurement and Public Disposal Act of 2005:
All Public Procurement shall be within the approved budget of the procuring entity and shall be
planned by the procuring entity concerned through an annual procurement plan.
The CEO also correctly pointed out that the tender committee usurped the role of the
evaluation committee. Under the procurement law, tender committees cannot make awards
against the recommendation of the evaluation committee. They can only refer the matter back
to the evaluation committee. The tender committees argument in rejecting the evaluation
committees report, that there was no synergy between the financial and technical scores,
sounded rather lame considering rankings are based on a combination of both.
Eventually, the Commission dropped the tender and would have resorted to a manual system
had the government not stepped in to acquire the kits in a government to government deal
that cost more than double the quoted amount.

4.3.

KANU Era Scandals Resurface

Pattnis claims over duty free shops

Kamlesh Pattni, of Goldenberg infamy was once more in the limelight, this time regarding
the control of duty free shops in the new terminal at Jomo Kenyatta International Airport. He
had gone to court to restrain Kenya Airports Authority (KAA) from awarding a tender for the
development, management or operation of three shops at the airports new unit. He claimed
exclusive rights to all the shops, including those to be constructed in the future, on the basis of a
1991 agreement with the government that granted his World Duty Free Company an indefinite
lease for shops built by KAA in all airports.

34 Curious because the award of tenders in public entities is normally an internal affair. The public procurement and
disposal regulations do provide room for the tender committee to invite observers or independent advisers or
members of the procurement unit to explain submissions or provide technical advice, where required. It is not
however immediately apparent what role UNDP was to play, particularly in light of reported attempts to influence
the award.
35 The Standard. 26 July 2012. Unease over Biometric Voter Registration by Martin Mutua and Vitalis Kimutai.

19

In 2008, Justice Mutava had granted an

injunction restraining KAA from awarding the
tenders. In November 2012 he held the KAAs
principal officers in contempt of court for
ignoring those orders. In effect, the judge, for
the second time, controversially ruled in favour
of upholding Pattnis claim to hold the said rights
in perpetuity. Subsequently Justice Mutava
reportedly came under investigation by the
Judicial Service Commission over allegations of
partiality in his rulings on companies associated
with Mr Pattni.36
Kamlesh Pattni

http://www.mwakilishi.com/sites/default/files/kamlesh-pattni.jpg

NSSF KANU Era Contracts

The National Social Security Fund (NSSF) reportedly paid Sololo Outlets, a company associated
with former Lugari MP Cyrus Jirongo and Mugoya Construction Company over Ksh830 million
as an out of court settlement in a dispute relating to housing projects undertaken during the
Kanu years.
The settlement concerning Jirongo and Sololo Outlets related to an agreement made with the
NSSF in September 1992 for the development of a housing project at a cost of Ksh1.2 billion, but
which was terminated a year later. Consequently the developer instituted a court case against
the Fund claiming over Ksh4.25 billion as damages arising from the termination.
It did not escape the attention of keen observers that the payments were made at a time when
the NSSF was undergoing major changes in senior management - the managing trustee had
been sacked and the tenure of the other trustees had expired.37

4.4.

Underhand Deals to Print Money

For the second time in his stint as a minister, Amos Muhinga Kimunya faced suspension from
the cabinet following allegations of financial impropriety by a parliamentary committee. He,
together with Central Bank of Kenya Governor Professor Njuguna Ndungu, was indicted by the
Parliamentary Accounts Committee (PAC) and declared unfit to hold public office. This followed
investigations into corruption allegations that the country lost over US$21.4 million in underhand
deals involving the Ministry of Finance, Central Bank and British currency maker De La Rue. The
duo allegedly cancelled a long-term tender worth US$45.2 million, for the printing of 1.71 billion
notes, in favour of a short term one worth US$67 million, to print 1.49 billion notes.

36 Daily Nation. 24 November 2012. Pattni returns to haunt Kenyans with dirty Kanu era rip-off schemes by Mugumo
Munene.
37 Daily Nation. 22 March 2012. NSSF pays millions for Kanu era deals by Patrick Mayoyo and Jaindi Kisero.

20

Amos Kimunya

http://starfm.co.ke/wp-content/uploads/2012/03/mumunya.jpg

However, the committees report was rejected by the House amid allegations that some MPs were
given bribes of between Ksh20, 000 to Ksh30, 000 to water it down. The PAC chair and Ikolomani
MP, Boni Khalwale, was reported to have claimed that he was offered a fee of Ksh10 million by a
cabinet minister to go easy on Kimunya.38

4.5.

Corruption in the Kenya Railways Staff Retirement Benefits

Scheme

A conflict of interest and a severe breach of trust by the trustees of the Kenya Railways staff
retirement benefits scheme were revealed following an audit carried out by an inspection team
from the Retirement Benefits Authority.
One of the findings of the audit was that there were irregularities in the disposal of properties
owned by the scheme. One such property, L.R Nairobi/Blocks 31/219, valued at Ksh525 million,
but which had attracted an offer of Ksh625 million, was sold for Ksh540 million by private treaty
without following due process. The trustees also allegedly accepted Ksh650 million in respect of
L.R 209/8760, which was Ksh50 million less than its valuation of Ksh700 million. Additionally, a
company had offered Ksh680 million but was unsuccessful in its bid.
The scheme trustees were also accused of abuse of office and disregard of internal controls and
procedures. The audit found that Beryl Odinga, the Chair, was irregularly appointed, as no minutes
existed to confirm her appointment. Further, in spite of her non-executive status, she drew a
monthly pay of Ksh40, 000, had an office, a driver, a personal assistant and two secretaries. She
was found to have been questionably advanced Ksh1.2 million for local and international travel, in
addition to having the scheme pay Ksh320, 000 to hire a car for her, over and above fuel costs for
her personal vehicle. She allegedly sat in every committee meeting, thus exerting undue influence.

38 The Standard. 7 September 2012. Shock over bribery of Kenyan MPs by Peter Opiyo.

21

The other trustees Dr. Mtana Lewa, Nduva Muli, Ken Wathome, Silas Gitari, Lazarus Keizi, Moses
Njeka, Priscilla Mukuria and Daniel Obop - drew sitting allowances of Ksh10, 000 and Ksh5, 000 for
out of town trips. The audit found the trustees to have held too many meetings over and above
the quarterly requirement, in addition to awarding themselves bonuses of Ksh50, 000 each in
2010.39

4.6.

No payment for Kenya Petroleum Refineries Shares

It emerged that the country may have lost Ksh7.4 billion in a transaction involving the transfer
of Kenya Petroleum Refineries Limited (KPRL) shares to Essar Energy Overseas Limited. The
government reportedly agreed to waive its rights to buy the shares as three multinational
companies (Chevron, BP and Shell), divested from KPRL in March 2008. The shares were offered
to Essar Energy Overseas Limited and in return the government was to receive US$11 million
as goodwill. In 2011 the Auditor General queried how the amount had been reduced to US$2
million, while also pointing out that there was no evidence that the Treasury had received any
money from the transaction.40 When the matter came before the Public Accounts Committee in
March 2012, Financial Secretary Mutua Kilaka and acting Director of Investment Beatrice Gathirwa
were unable to satisfactorily explain both the reduction in amount due and whether the company
had been competitively sourced.41

As evidenced by all the procurement issues that presented themselves during

the year, it is clear that public procurement remains the avenue through
which much, if not most of the corruption in Kenya is perpetrated. The Public
Procurement Oversight Authority seems unable to effectively perform its
mandate.
This can largely be attributed to the secrecy and underhand dealings that
surround public procurement, especially when contracts are worth large
amounts of money. Openness in government and contracting, particularly
leveraging technology, would go a long way to addressing corruption in the
public sector.

4.7.

Mismanagement of the Constituency Development Fund

A social audit by the National Taxpayers Association, covering 38 constituencies, uncovered

considerable rot in the management of the Constituency Development Fund (CDF). It found that
Ksh363 million meant for the fund in various constituencies could either have been misappropriated
or could not be accounted for. The worst performing constituency was Marakwet East, which
used only half of the Ksh31 million allocated to it, followed by Malava, Kibwezi, Naivasha and Kitui
Central.42

39 The Star. 5 March 2012. Kenya: Railas Sister Kicked Out of Pensions Scheme http://allafrica.com/stories/201203051647.
html
40 Business Daily. 3 August 2011. Kenya: Auditor Queries Sale of Oil Refinery Shares to Essar by Muna Wahome.
41 Daily Nation. 22 March 2012. Sh7bn feared lost in oil refinery scandal by Edwin Mutai.
42 NTA releases CDF report, http://www.citizennews.co.ke/news/2012/local/item/1503-nta-releases-cdf-report, 9 May
2012

22

A significant concern with regard to devolution is the opportunity for devolved corruption,
especially in the allocation of money from the CDF. In fact, the lack of public participation in the
choice and implementation of projects is one significant reason for the corruption that has already
taken root in this sector. In the future, it is critical that public participation be a core component
of the management of local funds. Local governments should establish regular and timely public
consultation sessions in which those who will be impacted by projects have a chance to voice
their opinions and questions on the same. Local governments should also ensure that they are
accountable to the public by explaining their responses to the public opinions expressed in these
sessions.

4.8.

Corruption at City Hall

Investigations by the Nairobi Law Monthly exposed a conspiracy by City Hall senior staff to allocate
Nairobis only working fire station to a private developer. They also revealed that over the years,
six public spaces set aside for fire stations in the city and worth an estimated Ksh3 billion had
been irregularly allocated to individuals. One such plot in Westlands, initially LR1870/111/284, was
reportedly subdivided and allocated to Gideon Moi (son of the former President) with a new title
deed, LR No 209/13263.43

4.9.

Lining Pockets at the Ministry of Defence

The Nairobi Law Monthly also alleged that unnamed politicians and senior officials at the
Department of Defence were enriching themselves from the Ksh14.7 billion allocated for
Operation Linda Nchi and were in fact prolonging the Kenya Defence Forces stay in Somalia so as
to keep lining their own pockets.44
Demanding complete transparency from the defense sector can be difficult, because disclosure of
certain information could endanger national security. There are mechanisms, however, for dealing
with this, at least partly, which have been tried in other countries. For instance disclosure could
be made to members of the responsible parliamentary committee that are sworn to secrecy;
scrutiny could also focus on progress in achieving the stated objectives of the deployment. At
the same time, however, problems such as the one described above prove that public scrutiny
can be helpful. And that secrecy must be limited to the absolutely necessary aspects. In the case
of Somalia, there would seem to be little need for the KDF to still be present. Advocacy efforts
should lobby for an exit strategy for Kenyan troops from the country, which might stem the type
of corruption mentioned above.

4.10. Ethics and Anti-Corruption Commission Cases under Investigation

During the year there were a number of cases that the Ethics and Anti-Corruption Commission
was reportedly following up, but which it did not completely unravel. These include:

Konza Technology City

The EACC announced in April 2012 that it was instituting investigations regarding allegations that
Ministry of Information and Technology permanent secretary, Bitange Ndemo, together with the
chief procurement officer of the Ministry, flouted the Public Procurement and Disposal Act, 2005

43 The Nairobi Law Monthly. 02 May 2012. The Sh3bn City Hall Conspiracy by Michael Rigby.
44 The Nairobi Law Monthly. 08 Sep 2012. Eyebrows Raised Over KDF Spending In Somalia War by Michael Rigby.

23

Artistic impression of Konza Techno City

http://www.transforming-kenya.com/cms/media/events/211.jpg

by acquiring 5,000 acres of land at Ksh1 billion for the ICT project at the proposed Konza City
through single sourcing, as opposed to an open tender. The EACC later forwarded the file to the
DPP, having recommended that the Permanent Secretary and the chief procurement officer be
charged with the offence of careless failure to comply with the law relating to procurement of
goods.

Kenya National Bureau of Statistics (KNBS)

The Director General of the Kenya National Bureau of Statistics (KNBS), Anthony Kilele and the
procurement manager, Fred Ayiera, were arrested and charged with failure to use an open tender
method in accordance with the Public Procurement and Disposal Act, 2005, in the procurement
of storage space for census material. Kilele was further charged with abuse of office for using his
office to improperly confer benefits amounting to Ksh7.39 million on one Samuel Ogot Baker
through a ghost company that purported to have provided the warehouse services. Mr. Baker was
also charged with fraudulently acquiring the money.45

National Oil Corporation

The EACC also recommended the prosecution of the Managing Director of the National Oil
Corporation of Kenya (NOCK) Ms. Sumayya Hassan-Athman and the supply manager, Maimuna
Kassim, for abuse of office after it was found that they did not follow the law in contracting a
firm to supply automotive gas oil. NOCK allegedly single sourced and paid Russian Oil and Gas
Manufacturers and Exporters Association (Ruogmea) over Ksh10 million for the purchase of
132,000 metric tonnes of automotive oil gas, which were never delivered to NOCK.46

45 EACC Press Release, http://www.eacc.go.ke/archives/pressreleases/KNBS%20OFFICIALS%20ARRESTED%20AND%20

TO%20BE%20TAKEN%20TO%20COURT.pdf, 10 July 2012
46 EACC Press Release, http://www.eacc.go.ke/PRESSRELEASES.ASP?ID=402, 5 August 2012

24

4.11. Murky goings-on in the Extractive Industry

Following discoveries of minerals, such as commercial coal deposits in Mui Basin in Kitui County,
huge crude oil wells in Turkana, and titanium deposits in Kwale, the country was gripped with
excitement, knowing that its economic fortunes could change dramatically in the near future.
However, integrity issues relating to the exploration and commercial exploitation of these
resources began to surface.

Oil Discovery in Turkana

Reports in the media alleged that a cabinet minister, a permanent secretary and a former adviser
to the Kenya government, were associated with a company that made a fortune by selling land in
a block where oil was discovered. Trade Minister Moses Wetangula, Energy Permanent Secretary
Patrick Nyoike and businessman Amyn Lakhani were alleged to have been at one time or another,
associated with Turkana Energy Incorporation, the parent company of Turkana Development
Corporation which sold a piece of land, block 10B to Africa Oil Corporation for Ksh840 million.
Soon after, oil was discovered at Ngamia 1 well, which lies within block 10B.47

Ngamia 1 oil rig in Turkana, Block 10B

http://allafrica.com/download/pic/main/main/csiid/00221219:12de50bb0f55586a50f4bd43b0764bbf:arc614x376:w614:us1.jpg

Coal in Mui Basin

Controversy surrounded the award of concessions to mine coal in Kituis Mui Basin to Fenxi Mining
Industry Group of China.
While the residents of Mui Basin went to court alleging infringements of their constitutional rights,
the local MP, Kiema Kilonzo alleged that Fenxi lacked the financial and technical capacity to deliver
on the project. He claimed that while on a fact finding visit to China, his entourage neither saw
evidence of projects handled by the company, nor profiles of its activities in China or elsewhere.
Fenxi Mining Industry Company Limited on its part accused Kiema Kilonzo of extortion. The
company is reported to have said that the legislator exhibited unfriendly and undiplomatic
behaviour while repeating intimidating demands for special favours during a visit to its facilities
in China.48

47 Daily Nation. 31 March 2012. The inside story of Kenyas oil discovery.
48 Capital FM. 29 July 2012. Kenya: Chinese Firm Now Accuses MP of Extortion by Victoria Rubadiri.

25

4.12. Bribes and Fraud in the Private Sector

Oxford University Press
A leading publisher in the country was blacklisted by the World Bank for three years after it was
found to have made irregular payments to government officials for two contracts to supply
textbooks under programmes funded by the Bank. Oxford University Press was also fined Ksh292
million by UK authorities and the World Bank as part of the settlement agreement.49

CMC Holdings - Directors Banned

The Capital Markets Authority banned seven former directors of CMC Holdings from holding
office in any listed firm for flouting legal and regulatory requirements leading to losses of millions
of shillings. The seven are: former Attorney General Charles Njonjo, Martin Forster, Sobakchand
Shah, Peter Muthoka, Jeremiah Kiereini, Richard Kemoli and Andrew Hamilton.
Boardroom wrangles had rocked CMC since 2011 with some directors accusing former chairs of
the Board of defrauding the company of billions of shillings. Kiereini was alleged to have siphoned
off hundreds of millions of shillings and hidden them in offshore accounts in Jersey (Channel
Islands) while he was the Chair. Peter Muthoka, who replaced Kiereini, was accused by some
directors of defrauding CMC through his company Andy Forwarders. The company allegedly
overcharged CMC by Ksh2 billion on logistic services over a five-year period.

49 Business Daily. 3 July 2012. Bribery scandal locks Oxford out of World Bank contracts by Victor Juma.

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5. The Murky Practice of Money

Laundering
Parliament pushed for the reopening of Charterhouse Bank amid claims that a Parliamentary
Committee on Finance, Planning and Trade cleared the bank of any wrongdoing in 2010, and that
the banks creditors were suffering from the freezing of their assets at the bank. Several MPs took
issue with Minister of Finance Njeru Githae and Central Bank (CBK) Governor Professor Njuguna
Ndungu, accusing them of frustrating efforts to reopen the bank. In response to questions raised
in Parliament on the bank, in September 2012 the finance Minister asked Parliament to censure
the CBK Governor for his failure to honour Parliaments resolution to have Charterhouse Bank
reopened. The bank was placed under statutory management by Central Bank for its alleged
involvement in money laundering and tax evasion in 2006.
High Court judge Weldon Korir in October temporarily ordered that Charterhouse Bank remain
closed following a petition by a local NGO, the Centre for Human Rights and Democracy. The
organisation argued that only the Central Bank could make the decision on whether to reopen the
Bank. (The case was to be heard 14 days after the judge issued the order, but at the time of writing
nothing has been reported on the progress of the case).

Charterhouse Bank

http://www.the-star.co.ke/sites/default/files/styles/node_article/public/images/articles/2012/10/05/88502/charterhousebank.png

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Kenya remains on the watch list of the Financial Action Task Forces (FATF) (the global antimoney laundering body) for its key deficiencies in curbing money laundering. However, the FATF
acknowledged that Kenya has made significant steps towards addressing money laundering
through the enactment of the Prevention of Terrorism Act 2012, the Capital Markets (Amendment)
Act 2012, the passing of the Proceeds of Crime and Anti-Money Laundering (Amendment) Act 2012
and the establishment of the Financial Reporting Centre (FRC). The FRC, which began operating
in April 2012, is tasked with receiving reports on suspicious transactions that may be related to
money laundering, forwarding them to the relevant law authorities, developing anti-money
laundering policies and putting into operation the Proceeds of Crime and Anti-Money Laundering
Act.50 Had Kenya failed to put up these measures in its anti-money laundering regime, it would
have risked joining the ranks of other countries that are facing international trade sanctions from
the FATF for their failure to adhere to global standards in the war against money laundering.

50 Money Laundering Act approves FRC, at http://www.citizennews.co.ke/business/2012/national/item/1365-moneylaundering-act-approves-frc, 17 April 2012

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6. The Year Ahead

2013 may be a make or break year for the country. It will herald a new era with freshly elected
leadership and a break away from centralised government.

6.1.

Transition to Devolved Government

Kenyas governance architecture is about to change radically following the March 2013 election,
marking the transition from a centralised to a devolved government. The foundations for this
change were put in place in 2012 with the enactment of The Transition to Devolved Government
Act of 2012. The Act established the County Transition Authority to facilitate and coordinate the
shift to the new devolved system of government. Its members were sworn in during the period
of the enactment of the Act.
Decentralising government to the counties has the potential to greatly enhance transparency and
accountability because citizens will be able to exercise greater scrutiny over the management of
their countys affairs. It also has the added advantage of achieving a better match between the
preferences of citizens and the plans and actions of their leaders. However, it comes with the risk
of creating a torrent of misappropriation of public funds, given the countrys consistently poor
record with management of decentralised funds, such as the CDF.
Concerns have also been expressed about the level of preparedness for what amounts to a
quantum leap in governance. According to some observers, many Kenyans are not adequately
aware of how the new system will operate. A report by South Consulting in May 2012 for instance,
found that about 29 per cent of citizens do not know the role of the governor, while 44 per cent
of citizens do not know the role of the County Assembly Representative. A survey commissioned
by AfriCOG also exposed these and other major gaps in citizens expectations of devolution. Other
observers have highlighted gaps in awareness among the citizenry with anxiety lingering on the
following issues:52
Which functions will be transferred to counties, when and why?
Do counties have enough money to deliver services?
What will happen to existing assets and liabilities?
How will government officers be redeployed?

6.2.

The Exit of President Mwai Kibaki

The year ahead will also see a new occupant at State House, as President Mwai Kibaki concludes
his tenure. What can the new Head of State emulate and what pitfalls should he avoid? What
lessons can he learn from the Kibaki years?

51 AfriCOG Survey on Devolution: http://www.africog.org/sites/default/files/Devolution%20Survey%20by%20AfriCOG_

final.pdf
52 Sunday NATION. February 2 2013. Transition authority running out of time to get the basics right by Wanjiru GikonyoThe Institute for Social Accountability. See also AfriCOG survey on devolution: http://www.africog.org/sites/default/
files/Devolution%20Survey%20by%20AfriCOG_final.pdf

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A comprehensive assessment will have to wait a little longer, but for now, it is safe to say that
Kibakis term in office has attracted barbs and bouquets in equal measure. On the economy he
appears to have succeeded. Even some of his most ardent critics concede that Kibaki transformed
an economy that, when he took over, was on its knees.53 A comparison with progress in some
other countries in the region, however, does point to quite some unachieved potential, with the
main barrier to progress being endemic corruption.
Nonetheless, some of the achievements under his watch were quite remarkable. In its early
days the Kibaki government introduced free and compulsory primary education, an initiative
that received accolades, including praise from former US President Bill Clinton. The move more
than doubled school enrolment, from 800,000 in 2002 to 1.9 million in 2012. Besides free primary
education, some major gains were made in the education sector. Transition from primary to
secondary education jumped from 43 per cent in 2003 to 73 per cent in 2012. Access to university
education grew phenomenally - from 75,000 in 2002 to 252,554 in 2012 - with the launching of
15 new universities.54
Perhaps the most indelible mark of the Kibaki years will be the expansion of infrastructure. Projects
on roads, energy, electricity networks, fibre-optic cables and mobile telephony all expanded
exponentially. The signature projects were the Thika Superhighway and the US$37 billion road,
rail, oil pipeline, air and sea ports mega-programme, LAPSSET (the Lamu Port-Southern SudanEthiopia Transport project). The development has attracted significant growth in investment.
Nairobi for example, has, over the Kibaki years, become the destination of choice for multinationals
setting up office in parts of Africa, including General Electric, Google, IBM, Visa International, Pepsi,
Nestle, Foton Automobiles, World Banks International Finance Corporation (IFC) and South Africas
FirstRand Bank.55
Kibakis tenure also witnessed the country becoming a global leader in mobile banking. In addition,
tax collections soared, enabling the country to become more self-reliant. In spite of a stuttering
start that resulted in a rejection of a proposed draft constitution in 2005, Kenya did eventually
achieve a new constitutional dispensation in 2010, under Kibakis watch. The new constitution
secured greater personal freedoms, human rights and civil liberties, besides setting the stage
for far reaching reforms particularly in the Judiciary. Kibaki broke away from tradition with his
controversial low-key leadership style. He did not have his portrait on all currency units or have
a plethora of streets, places and institutions named after him. He did not sanction praise songs
composed in his honour, nor seek to dominate and lead all news bulletins with reports of his
activities. All this was a refreshing departure from the oppressive omnipresence of his predecessor,
Daniel arap Moi.

53 Sunday Nation. January 12 2013. History will judge Kibaki as Kenyas best president by Makau Mutua.
54 State House. 2012. Building a Working and Caring Nation; Mwai Kibaki and the Transformation of Kenya.
55 Daily Nation. 13 October 2012. Multinationals now turning Nairobi into hub for Africa by Griffins Omwenga.

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Kibaki leaves a country that is on the verge of economic take off, provided the necessary reforms
are energetically pursued. To his admirers he was the best thing that could have happened to
Kenya a view best articulated by Macharia Kamau, (a Kenyan representative at the UN) (2012):
At any other time in history, in any other country, Kibakis achievements would have been immortalized
for posterity. 56
While his achievements on reviving the economy were significant, so were Kibakis failures. There
were times when he displayed ambivalence and sardonic indifference on burning issues of
national importance. In matters relating to governance and anti-corruption in particular, his critics
point to some catastrophic failures.
In the early days of his presidency, he reneged on a memorandum of understanding on powersharing with leading politicians, which had seen him ascend to power. He then proceeded to
make appointments in key dockets such as security and finance that were heavily skewed in
favour of his cronies. Throughout his tenure, virtually all senior positions in the Ministry of Finance,
internal security, the Central Bank and the Kenya Revenue Authority were held by persons from
his ancestral backyard. This, more than any other factor, led to ethnic polarisation, discontent and
instability, culminating in the rejection of the draft constitution in 2005.

Mwai Kibaki

http://jambonewspotcom1.jambonewspot.netdna-cdn.com/wp-content/uploads/2013/04/Kibaki-era.jpg

56 Macharia Kamau. 2012. A Statesmans Legacy. Gale, Cengage Learning. IC Publications Ltd.

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Having been elected on an anti-corruption platform and starting off well by appointing renowned
anti-corruption campaigner John Githongo to spearhead the fight, he quickly abandoned the
cause and looked the other way as scandal after scandal littered his stay in office. He failed to
conclusively bring closure to the Goldenberg scandal, not to mention the unresolved Anglo
Leasing, Triton Oil and maize scandals, the sale of the Grand Regency hotel, the cemetery scandal
and so on. There were attempts at window dressing - some ministers stepped aside for a while but most perpetrators got away scot free.
In addition, some very strange happenings took place during the Kibaki era. Posterity may well
look back at the confusion surrounding the Standard Media Group raid by security forces, the
Artur brothers and their links to significant senior figures, and the crackdown on Mungiki followed
by the release of their leader from prison, and wonder what that was all about.
The biggest blot on the Kibaki legacy has to be the violence that engulfed the nation following the
dispute over the 2007 elections, culminating in the International Criminal Court indictments. He
will have to accept that it was during his tenure that the country almost self-destructed, following
allegations of election rigging, resulting in over 1,000 Kenyans losing their lives and over 600,000
being displaced. Some observers believe this to have been the worst crisis in Kenya since the state
of emergency in the 1950s.
The writer, Tee Ngugi summarizes the greatest failures of the Kibaki administration as the
opportunity it missed to re-engineer a national culture consistent with the values spelt out or assumed
by the new Constitution: a less tribalised nation, a less selfish society, a culture where people claim their
rights as well as their responsibilities, a culture that does not tolerate mediocrity and excuses...57

57 The East African. 19January 2013. Mugumo trees and the odd ambivalence of Kibaki by Tee Ngugi.

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Acknowledgment
AfriCOG thanks team members Charles Wanguhu, Beatrice Odallo, Stephanie Wairimu,
Maureen Kariuki, Seema Shah, Anyona Obutu, Carole Theuri, Kadenge Kidiga, Noreen
Wahome and Maureen Gachomo for their commitment to our work.
AfriCOG also thanks Maina Mutuaruhui and Hilary Atkins for their contribution to this
publication.
The production of this publication has been made possible by the support of the Drivers
of Accountability Programme, a program of the Government of the United Kingdoms
Department for International Development (DFID), DANIDA and CIDA.
We are also grateful to the Open Society Initiative for East Africa (OSIEA) for their support
to our work.
The views expressed in this report are those of AfriCOG alone.

April 2013

Africa Centre for Open Governance

P.O. Box 18157-00100, Nairobi,Kenya.
Telephone: +254 20-4443707/0737463166
Email: admin@africog.org
Website: www.africog.org

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